Coronavirus causes spike in March mortgage delinquency rate for the first time in decades
Prior to the nationwide lockdown, the mortgage market was showing signs of strength
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While the impact of the coronavirus pandemic on the U.S. housing market is still being assessed through incoming data – a new report shows homeowners are failing to make their mortgage payments at an unusually high rate.
According to a newly-released report from real estate data and analytics firm Black Knight, delinquencies in March rose more than 3.3 percent, which is the first time they have increased during the month of March this century. Researchers consider a loan delinquent if it is 30 days or more past due.
Typically, March is a particularly strong month because people are receiving their tax refunds, so past-due borrowers have an easier time making up payments.
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Homeowners that are in forbearance are, however, calculated as a subset of delinquencies under the data even though they will not be considered delinquent on their payments by servicers.
The numbers are not only a stark contrast to mortgage market trends typically observed in March, they are also a divergence from data recorded earlier this year, which provides a glimpse at how the coronavirus outbreak has affected U.S. housing. Lockdown orders only took effect about mid-way through March.
Prior to those stay-at-home guidelines, and the massive wave of layoffs that they caused, national foreclosure and 90-day delinquency rates hit new record lows. Pre-payments had also jumped by 40 percent thanks to historically low mortgage rates.
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Meanwhile, there have been a surge in homeowners entering into forbearance agreements. More than 2.9 million homeowners were in forbearance, or 5.5 percent of all mortgages, as of April 16. That amounts to about $651 billion in unpaid principal.
Forbearance is when a lender allows a mortgage holder to pause, or temporarily reduce, payments with the expectation that everything is repaid in full over time.
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The surge is not surprising. Part of the multitrillion-dollar stimulus package passed by lawmakers called for lenders, including Fannie and Freddie, to allow people to put their payments on hold if they are experiencing coronavirus-related financial difficulties.
More than 20 million Americans have filed jobless claims since the start of the shutdown.